Dear Dr. Manmohan Singh ji,
You would kindly recall the issue of gas price revision of RIL operated KG-D6 basin that I had raised in my earlier letters to you. You are also aware that the Finance Ministry has asked Petroleum ministry to examine the issue of pricing the shortfall quantities of gas at the old rate of $4.2 per mmbtu and the categorical rejection of this suggestion by the Petroleum Minister.
It has appeared in the press that the Petroleum Ministry has revised its earlier stand and has now circulated a Cabinet note to the effect that RIL shouldn’t get revised price on gas till the reasons for the fall in output are ascertained. It is further learnt that the Petroleum Ministry has proposed that if it reaches the conclusion that the fall was due to geological difficulties, then they would be allowed the benefit of the price increase to RIL.
The formulation of the Cabinet note in this fashion has again exposed the duplicity of the Petroleum Minister. You would recall that the government has consistently rejected the contention of RIL that the shortfall is due to geological difficulty. I would like to quote from the notice issued by the Government to RIL when cost recovery of $ 1 billion was sought to be disallowed in May 2012:
" You have failed to fulfill your obligations and to adhere to the terms of the PSC and are in deliberate and willful breach of PSC and have thereby caused immense loss and prejudice to the government.
As against the aforesaid required 31 wells to be drilled by April 2012 in accordance with the amended IDP, till date you have completed the drilling of only 18 wells and even out of these 18 wells, only 12 wells are presently in operation.
Your breach of PSC including failure to adhere to and comply with the Amended IDP have resulted in heavy loss of production of gas thereby causing loss to the Government and of scarce natural resource to the nation. You are not entitled to the recovery of costs incurred by you for the excess capacity created in block KG-DWN-98/3 and such recovery of costs has to be limited only to the extent of the infrastructure used by you for the production of the gas."
I may also add that this opinion was reached in consultation with Director General of Hydrocarbons ( DGH), the technical arm of the Petroleum Ministry. In fact the DGH wrote as many as seven letters between December 2010 and April 2011 pointing out the lapses on part of RIL and rejecting its contention of geological uncertainty. This was further re-iterated in the Management Committee meeting dated 17/3/2011. The same conclusion was also reached by the one man expert committee of Dr P Gopalkrishnan, a reservoir expert, who submitted his report to the Petroleum Ministry in April 2011. I must also point out that the Petroleum Ministry has also answered a number of questions in the Parliament wherein it rejected the claim of RIL regarding geological uncertainty.
Trying to re-open this issue, which had been conclusively settled by the previous Petroleum Minister, is a thinly disguised attempt to dilute the earlier stand of the government that the shortfall was on account of deliberate malfeasance of RIL. You are already aware that the present Petroleum Minister has deliberately stalled the arbitration proceedings for the recovery of the penalty of $ 1 billion. By trying to reverse the earlier view of the government, he is trying to weaken the arbitration proceedings and give an alibi to RIL to get away with its grave breach of the PSC.
Further, the Petroleum Minister has chosen not to consult the Fertiliser and Power ministries on this Cabinet note. Not consulting the biggest user ministries further shows the mala fides of the minister, to take a decision by stealth, without proper inter- ministerial consultation.
Since the Government has already taken a view that RIL had deliberately reduced production, the obvious conclusion has to be that the shortfall quantities have to be supplied at the old rates.I would like to re-iterate the financial benefits to the country if this decision were enforced. The shortfall in production in the years 2010-11, 2011-12, 2012-13, 2013-14 against approved targets are 5 mmscmd, 28 mmscmd, 55 mmscmd, 66 mmscmd respectively. This means that the total shortfall over the last four years is a mammoth 154 mmscmd. If this quantity of natural gas were supplied at the old rate of $4.2 per mmbtu instead of the revised rate of $8.4 per mmbtu recently fixed by the government, this would mean a saving of $4.2 per mmbtu. Simple calculations show that for a total of 154 mmscmd of gas and a total price decrease of $4.2 per mmbtu would translate into a total saving of Rs. 63,000 crore for the country. I would request the government to insist that RIL supply the shortfall quantity at the old rates to ensure that their sinister design of deliberately reducing production does not result in windfall profits for them.
I earnestly re-iterate that the government insist that RIL supply the shortfall in gas production at the old rates. I would also request that the government reconsider the decision to raise prices of natural gas and keep it in abeyance until these issues are openly debated with all stakeholders.
With kind regards,
(Gurudas Das Gupta)
Dr. Manmohan Singh,